Operational risk refers to the risk of loss owing to an event that could impact on NZDMO's ability to produce its outputs to the quality, quantity and cost specified. Risk events include resource failures or constraints, control and security breaches or failures, transaction errors, compliance breaches, the breakdown of key relationships and disasters.
NZDMO's generic objectives in respect of operational risk are to:
- mitigate financial and reputational loss arising from operational failure by effectively managing operational risks where it is cost effective to do so, and
- establish a culture of continuous improvement of operational policies and practices.
Operational risks in NZDMO are managed in a number of ways. Controls include general Treasury policies, NZDMO-specific policies, reporting and performance management requirements, delegations and systems access restrictions. They are supported by close communications and regular management meetings that, in turn, reinforce a strong team ethic. Independent experts, such as external auditors, provide additional support in managing operational risk.